5 Tips Before You Declare Bankruptcy
Canadians are facing record levels of debt. For the first time in history, the average consumer owes $1.71 for every $1 of disposable income, and with rising interest rates, this is a recipe for disaster. But who can blame Canadians for getting into pecuniary trouble?
Incomes are flat, the cost of living is increasing, and most Canadians are living paycheque to paycheque. Unfortunately, when you’re finally unable to keep your head underwater, your only solution is to file for bankruptcy. This is becoming a common reality even for millennials – those consumers who are born between 1980 and 2000.
Are you mulling over bankruptcy? When your liabilities far exceed your assets by an astronomical amount, you may have no other choice. But before you declare insolvency and start anew, it is crucial to employ a series of measures.
Here are five steps to take when thinking about bankruptcy in Canada:
1. Examine Your Household Financial Situation
It may have been a while since you last examined your household’s financial situation, which is part of the reason why you got into this mess in the first place. But now would be an opportune time to see how much you earn, how much you spend, how much debt you have, and how much your assets are worth.
Who knows? Perhaps your money woes are not as bad as you initially thought.
2. Assess Your Credit Report
Many Canadians do not apply for a credit report – partly because it comes with a $20 to $30 price-tag, unlike in the United States where it is free.
Despite the cost of having to access your credit report, it is a worthwhile expense. You may find that there are discrepancies, errors, and even identity theft or fraud. By contacting the necessary authorities, you can erase some of these items and reduce your overall debt total.
3. Contact a Credit Counselling Firm
Now that you are moving ahead with bankruptcy, you will need to get in touch with a credit counselling firm. This organization will provide you with the necessary advice, documents, paperwork, and course of action to proceed with your request.
Moreover, a credit counselling entity will contact all of your creditors and inform them that you are seeking out bankruptcy protection.
Remember, this is something that you cannot do on your own.
4. Can You Afford Bankruptcy Filing?
Yes, it may sound simple to merely declare bankruptcy, but there’s a myriad of costs you will need to bear. The base contribution of $200 per month. The fees for filing. And then there are court costs, mailing charges, government-set fees, and the list goes on.
The key question is: are you able to afford filing for bankruptcy?
5. Hire an Attorney to Help Your Case
Finally, and perhaps the most important aspect of your fiscal difficulties, it would be prudent to hire an attorney to help you with your case. It is true that it will hit you financially, but a lawyer who specializes in bankruptcies and other money matters will pay dividends down the line.
Whether in Canada or the U.S., bankruptcy laws have metastasized into immense complexity. It is hard to fathom the rules and regulations behind insolvency, which could serve as a risk to you and your family.
In the end, it would always be better to meet with a bankruptcy attorney, ask a lot of questions, determine if bankruptcy is the right path for you, and find out what your options are. By taking on an attorney, you surround yourself with another apt professional – the credit counsellor is the other one.
Let’s be honest: bankruptcy can be hard to handle. You will feel a plethora of emotions: disappointment, embarrassment, shame. Nobody ever wants to deal with insolvency, but life happens, and a series of unfortunate events can create hurdles and setbacks. By taking the necessary precautions, you can have peace of mind that you can hit the restart button.
